I'm 26, can't affford to buy London, so buy elsewhere?

7sefton

Hi everyone


First time posting in this forum, so thanks for any help you can give a complete beginner!


I'm 26, have lived in London since graduating, have a job I like (pays around £38K with promotion hopefully on the way), and can't imagine moving anytime soon (friends and work keep me here). I also have around £45K in savings from inheritance.


I've looked and simply don't think I can afford to buy anywhere in an area of London I'd like - and anyway, I quite like the flexibility renting in the capital gives me.


However I'm originally from Liverpool, and can't help feeling jealous of friends who stayed at home and are now buying really nice houses despite earning less than me. A big part of me is also worried that my savings (i.e. my deposit) are losing spending power just sitting in an ISA earning around 2%.


So I've made a resolution that this year I really think carefully about making my first move on the property ladder.


Do you have any advice on what sort of options I should be looking at? I've considered buying somewhere with big rental appeal in Liverpool and letting it out, but then all my savings are tied into a house and I'd need it to realise some big capital gains to make it worthwhile (I think?!).


Or should I look in London?


Many, many thanks for your thoughts!

Snakey

Hi Sefton

So there are some bigger questions here first. What are your long-term plans? Will you stay in London forever and want to buy here one day, or do you see yourself going back home to Liverpool? Are you planning on marriage and kids one day, and if so what's your timeline for that? What job do you have, is your salary likely to keep going up until you are on six figures going into your forties or is there a lower plateau?

(And a completely separate piece of advice: make sure you are making pension contributions up to the level that your employer matches.)

ViolaLass

In the mean time, your money would probably earn better interest out of an ISA e.g. Santander 3%.

kingstreet

The market for BTL mortgages for those who do not already own their own home is shrinking rapidly.

Expect the bulk of the BTL lending market to be closed to you.

I_have_spoken

I'd sit tight until the May election, then consider options. But the fact is, BTL LLs are going to be a 'cash cow' for whoever wins.

Let's be honest, returning to a provincial town after living in London would bore you silly until you are married with kiddies.

You can expect interest rates to go up in 2015 which may force some distress sales by peeps who have bought in the last 18 months of the London 'bubble'.

Mallotum_X

I_have_spoken wrote: »

I'd sit tight until the May election, then consider options. But the fact is, BTL LLs are going to be a 'cash cow' for whoever wins.

Let's be honest, returning to a provincial town after living in London would bore you silly until you are married with kiddies.

You can expect interest rates to go up in 2015 which may force some distress sales by peeps who have bought in the last 18 months of the London 'bubble'.

Btl are more likely to be an influential group of voters. Not going to be anyone's cash cow in the near future. Using the word fact doesn't make your hopes a reality.

Rates may go up but extremely unlikely to go up much or very fast. I would not be relying on the extremely unrealistic outcome of distressed sales.

London shows every sign of having lower hpi in 2015 but prices are extremely unlikely to fall coming out of a recession.

7sefton

Thanks for all the comments so far.

To add a bit of context:
I'm a graduate trainee with a large company (permanent contraxt), coming to the end of my 2 year training period when my salary will go up to about £43k. After that, I obviously hope to keep progressing each year but I doubt I'll ever earn a banker-style salary.
Currently single, and certainly no plans to marry or have kids soon!
Also no plans to move back to Liverpool- I'd perhaps consider moving to another big city for work (like Manchester) but I can't see Liverpool ever being home again.
My anxiety around housing is simply that I'm being left behind: friends who don't live in London are already on the propert ladder so I figure I should join them in some way if at all possible, especially considering how my financial position is good and I'm rather lucky!

Also, why would BTL be closed to me? Why can't I just buy somewhere with a normal mortgage and then rent it out as a private arrangement to cover the mortgage while I live elsewhere?

sazpot

Having a residential mortgage when you intend to rent is against the banks rules.

I would suggest buying a property to live in yourself in an inexpensive commuter town and converting to buy to let a year or 2 down the line if living there doesn't suit you.

ViolaLass

7sefton wrote: »

Also, why would BTL be closed to me? Why can't I just buy somewhere with a normal mortgage and then rent it out as a private arrangement to cover the mortgage while I live elsewhere?

1. That's fraud.

2. Who would look after it? You? What if the tenants call at 3am saying there's a leak?

3. Who's going to do inspections or show the place to prospective tenants? You? How often will you end up driving there?

4. You need to think about tax. You can't just cover the mortgage and leave it there.

I_have_spoken

I'm a graduate trainee with a large company

Large with overseas offices? If so, I'd be pushing for a placement outside of the UK so you can see the world while you're young. Britain is on the skids again and will be a basket-case if Labour/SNP coalition get in in May

Snakey

I spent many years waiting for the "inevitable" crash and associated fire sale that people were predicting for London since I moved here in 1999. With hindsight, I should have bought just as soon as I could. There are lots of people out there with strong views about what's going to happen to house prices, interest rates, the collapse of London as a financial centre etc, but just because someone is authoritative in voicing their opinion doesn't mean they're right.

While you wait, you get older one day at a time - putting your life on hold for years in order to see what happens in the future is a waste. Make a decision, go for it, it's unlikely to be a total disaster as long as you have thought it through and are being sensible. You have a cushion (your deposit) which you can afford to lose if it goes wrong, at which point you start again with nothing and a lesson learned - you're young and you have earnings potential so it won't be the end of the world.

Ignore what your friends are doing. It's not relevant to you. They're settling down and buying houses in their home town, you're not. That's a choice you made, and it has consequences just as theirs does - you can't have your cake and eat it. Time will tell whether you were right and they were wrong, or (excuse me being patronising for a minute) more likely you'll get to a certain age and realise that you are not in fact locked into a lifelong competition with your old classmates and it really doesn't matter how anybody else is doing as long as you're happy.

IHS makes a good point about the possibility of an overseas secondment, although you could probably rent out a flat for a year or two if you happened to own one at the time.